Exam 13: Pricing Decisions and Cost Management

Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Gracius Manufacturing has a policy of adding a 20% markup to full costs and currently has excess capacity.The following per unit data apply for sales to regular customers: If the European customer wanted a long-term commitment,and not a one-time-only special order,for supplying this product,calculate the most likely price to be quoted assuming the markup remains the same?

Which of the following is an advantage of using full cost of the product as the cost base?

Bouchard Company manufactures a product that currently has a full cost of $700.Its target operating income per unit is $50 and management's budgets assume that same target operating income per unit for the foreseeable future.To stay competitive,Bouchard management believes it must cut its price by 15%.What will be its new target price?

When the firm uses the target-costing approach to pricing,the target cost per unit is the difference between the per unit target price and the per unit target ________.

Customer life-cycle costs ,because they are only budgeted items,do not influence the prices a company can charge for its products.

Jack's Back Porch manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $270 per table,consisting of 80% variable costs and 20% fixed costs.The company has surplus capacity available.It is Jack's Back Porch's policy to add a 60% markup to full costs. A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.Jack's Back Porch is invited to submit a bid to the hotel chain.What per unit price will Jack's Back Porch most likely bid on this long-term order?

Which of the following can be used to determine markup percentage in the case of cost-plus pricing?

Fluctuations in exchange rates between different countries' currencies affect costs and pricing decisions of a company.

Which of the following best describes customer life-cycle costs?

What factors may influence the level of markups?

In relation to target costing,which of the following best describes target cost per unit?

After conducting a market research study,Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line.It is estimated that the new interior door can be sold at a target price of $260.The annual target sales volume for interior doors is 20,000.Magnificent has target operating income of 40% of sales. What is the target cost for each interior door?

Making design decisions is an example of managing costs:

The difference in rices between countries can vary beyond the cost of delivering the product to each country,solely because of changes in exchange rates.

In a long-run,it is worthwhile to sell a product only if the selling price exceeds ________.

Longball Company manufactures basketball backboards.The following information pertains to the company's normal operations per month: Output units 15,000 boards Machine-hours 4,000 hours Direct manufacturing labor-hours 5,000 hours Direct manufacturing labor per hour \ 12 Direct materials per unit \ 100 Variable manufacturing overhead costs \ 150,000 Fixed manufacturing overhead costs \ 300,000 Product and process design costs \ 200,000 Marketing and distribution costs \ 250,000 Required: a.For long-run pricing,what is the full-cost base per unit? b.Longball Company is approached by an overseas city to fulfill a one-time-only special order for 1,000 units.All cost relationships remain the same except for an additional one-time setup charge of $40,000.No additional design,marketing,or distribution costs will be incurred.What is the minimum acceptable bid per unit on this one-time-only special order?

Reverse engineering can be used to analyze competitors' products to determine product designs and materials and to understand the technologies competitors use.

Whether the firm uses the market-based approach or the cost-based approach for pricing decisions,the market forces must be considered.

Greentree Incorporated manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $120 per table,consisting of 60% variable costs and 40% fixed costs.The company has surplus capacity available.It is Greentree's policy to add a 30% markup to full costs. a.Greentree Incorporated is invited to bid on an order to supply 100 rustic tables.What is the lowest price Greentree should bid on this one-time-only special order? b.A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.Greentree Incorporated is invited to submit a bid to the hotel chain.What is the lowest price per unit Greentree should bid on this long-term order?

The Maize Eagles are evaluating ticket prices for its basketball games.Studies show that Friday and Saturday night games average more than twice the number of fans compared to other days.The following information pertains to the stadium's normal operations per season: The stadium is open for 4 operating hours on each day a game is played.All employees work by the hour except for the administrators.A maximum of one game is played per day and each fan has only one ticket per game. The stadium authority wants to charge more for games on Friday and Saturday.What is the minimum price that should be charged for peak attendance nights?